A Banksy mural at the centre of a controversial auction was withdrawn from sale at the 11th hour.

Slave Labour, which shows a young boy hunched over a sewing machine making Union Jack bunting, appeared on a wall in Wood Green, north London, last May, just before the Diamond Jubilee celebrations.

It disappeared from the side of the Poundland store last weekend and was due to be auctioned thousands of miles away in Miami last night, where it was expected to sell for up to £450,000. But a spokesman for auction house Fine Art Auctions Miami (FAAM) confirmed that Slave Labour and Wet Dog, a second Banksy painting listed, had been withdrawn from sale. No reason was given.

Claire Kober, Leader of Haringey Council, which campaigned for the artwork's return to the UK, said: "It's a true credit to the community that their campaigning appears to have helped to stop the sale of this artwork from going ahead. We will continue to explore all options to bring back Banksy to the community where it belongs."

An FAAM spokesman said: "Although there are no legal issues whatsoever regarding the sale of lots six and seven by Banksy, FAAM convinced its consignors to withdraw these lots from the auction and take back the power of authority of these works."

The mural was due to feature as lot six in the Modern, Contemporary and Street Art sale last night. It appeared that a starting bid of 400,000 US dollars (£262,450) had been made before the auction of the art work was halted.

Wood Green councillor Alan Strickland said he was delighted with the development. "To have the mural withdrawn from sale at the 11th hour is a wonderful surprise for the community here in Wood Green," he said. "It suggests the level of international media attention has had a real impact." He added: "Local people have already been in touch about the brilliant news, but we need to know what's going to happen now. It seems like we're half-way there. The next step is to get it returned."

New art works have cropped up on the original site where Slave Labour was sprayed. A rat holding up a sign saying: "Why?" has been stencilled next to the empty space where the mural stood, with some speculating it could be another work by Banksy. And on Saturday a new painting, of a woman wearing a nun's habit with a red star over one of her eyes, appeared over the Slave Labour site.

The artist himself, who shields his real identity, has so far remained silent on the issue. But on the questions and answers section of Banksy's website, someone has asked: "What do you think about the auction houses selling street art?"

In reply, the following Henri Matisse quote is given: "I was very embarrassed when my canvases began to fetch high prices, I saw myself condemned to a future of painting nothing but masterpieces."